New Jersey Court Green Lights Provider-Patient Arbitration Agreements

       In two rulings handed down over the last two weeks, the Appellate Division of the Superior Court of New Jersey removed any doubt that New Jersey healthcare providers can enter into enforceable, pre-dispute agreements to arbitrate medical malpractice claims.

        Estate of Ruszala v. Brookdale Living Communities involved an arbitration clause in a nursing home admissions agreement, which on its face violated a 2003 New Jersey statute barring such agreements. The Court found that the New Jersey statute was preempted by the Federal Arbitration Act (a result consistent with recent, similar rulings by the Supreme Courts of Illinois and Missouri), and went on to state that there is nothing about such agreements to render them unenforceable, per se. The Ruszala Court did strike down aspects of the arbitration agreement found to be unconscionable and against public policy in New Jersey, i.e., a cap on compensatory damages, limited discovery and a ban on punitive damages.

       Moore v. Woman to Woman Obstetrics & Gynecology concerned the ability of a physician to enforce an agreement to arbitrate signed by a patient as part of the physician\’s patient intake process. The Moore Court ruled that such an agreement was not, per se, unenforceable. Once again, the Court made clear that such agreements must be judged on a case by case basis to determine whether the patient\’s rights to due process have been preserved. Issues such as the patient\’s receipt of a copy of the agreement and the circumstances of her signing the agreement were remanded to the trial court for findings of fact.

       I wrote here previously about the growing practice among physicians to require patients to sign pre-dispute arbitration agreements. Ruszala and Moore make it clear that there is nothing to prevent New Jersey hospitals, nursing homes, physicians and other healthcare providers from requiring that patients agree to arbitrate future disputes, including malpractice claims. To be sure, providers choosing this path would do well to tailor their agreements to accomplish their primary objective: shifting the forum for the resolution of malpractice disputes from a jury to an arbitrator (or panel of arbitrators). Piling on other impediments to the patient\’s claim, such as limitations on non-economic damages, discovery and punitive damages remain suspect, and are ill-advised. Care should also be taken in assuring that the patient fully understands what he or she is signing, and has a realistic right to “opt out.”

       Absent an appeal and reversal by the New Jersey Supreme Court, or federal legislation along the lines of the proposed Arbitration Fairness Act of 2009, pre-dispute agreements to arbitrate malpractice claims in New Jersey are here to stay. Two major providers of ADR services, the American Arbitration Association and the American Health Lawyers Association have policies against accepting medical malpractice claims arising under pre-dispute agreements to arbitrate. Accordingly, providers and counsel considering the use of such agreements must carefully address the language governing the arbitrator selection process.

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